Indian mineral block auctions hit speed bump

Mining News - Published on Wed, 27 Jun 2018

Business Standard reported that online auctions of non-coal mineral blocks have moved into the slow lane after the initial euphoria following the framing of Mineral Auction Rules, 2015. Of the 78 blocks identified or listed for auctions by states, only 41 have been successfully conducted.

Karnataka has seized the lead in electronic auctions, putting up seven blocks (all iron ore), closely followed by Madhya Pradesh (6). Rajasthan, Odisha and Chhattisgarh have auctioned five mineral blocks apiece apart from Jharkhand (4), Gujarat (3) and Maharashtra (3).

However, auctions which killed discretionary allotment of leases, have not picked up momentum as expected. Each year, 40-50 mineral blocks are readied for auctions but the actual number is disproportionately lower. In the inaugural year of promulgation of Auction Rules (2015-16), six blocks were auctioned. The figure rose to 15 in 2016-17 and in FY18, 14 blocks could be auctioned. In the current fiscal, six mineral blocks have passed the auction test, though Notice Inviting Tenders are ongoing for 22 other blocks. The success of these listed resources would hinge on factors like the blocks meeting statutory norms and participation of bidders. Last month, online auctions of two iron ore blocks- Chandiposhi and Purheibahal in Odisha were deferred after a restraining order of the Delhi High Court on ambiguity in eligibility of one of the bidders.

Stakeholders observe that the mandatory compliance with G2 level exploration norms has marred the pace of auctions. Despite the availability of ample blocks, they could not be auctioned as not all of them meet this criteria.

An official with a steel company said that “At present, auctions of mineral blocks are contingent on meeting the G2 exploration norms. But, these norms are indicative and there is provision for relaxation of the exploration norms under Rule 8 of Minerals Rules, 2015. Compliance with the G2 level exploration is proving to be a detriment to holding of e-auctions in a time frame. Mineral blocks of adequate dimensions can be put up for auctions by complying with G1 exploration level.”

Year

"Mineral Blocks Auctioned"

Estimated value of Resources*

Total revenue to govt in 50 years*

2015-16

6

298.17

181.45

2016-17

15

633.72

552.13

2017-18

14

901.36

705.33

2018-19**

6

36.4

43.04

Total

41

1869.65

1481.95

Most of the available mineral blocks in the country could not be upgraded to G2 or G3 level because of constraints in exploration. India figures amongst the least explored countries where mineral exploratory activity is limited to two central government agencies- Geological Survey of India and Mineral Exploration Corporation Ltd. Though the state directorates of mining & geology are also tasked with exploration work, most of them are wanting in expertise or manpower or both.

To spur private sector participation in mineral exploration, the Union mines ministry has rolled out the National Mineral Exploration Policy, 2016. RK Sharma, secretary general with the Federation of Indian Mineral Industries, however, feels the step will encourage contractual drilling in the guise of exploration.

The other vexing factor is the auctions of 288 mining leases due to expire by March 2020. Fifty nine (59) of these are working mines, contributing significantly to iron ore, manganese and chromite output. No concrete roadmap is ready yet to prepare the blocks for auctions inspite of the Union mines ministry exhorting states to prepare the lapsing leases for a seamless transition. According to Rule 18 of Mineral Concession Rules 2016, these blocks can be auctioned only after their lease validity expires. Moreover, a recent amendment in Mineral Concession & Development Rules, 2017 has mandated even the lapsing blocks to be explored to G2 level to make them eligible for auctions.

The 41 mineral blocks auctioned are valued at INR 1.86 trillion. The resources promise INR 1.48 trillion in revenue for the host states and this includes an incremental revenue of INR 1.15 trillion due to auctions. The residual INR 331.47 billion will come by way of royalty and contributions by lessees to District Mineral Funds and National Mineral Exploration Trust.